MNI US OPEN - IMF See Flexibility in BoJ Approach

NEWS

NATO (MNI): Defence Ministers to Meet in Brussels 14-15 Feb

NATO has confirmed that a meeting of defence ministers will take place in Brussels on 14-15 Feb, with a separate meeting of the US-led Ukraine Defense Contact Group taking place on 14 Feb. This will be the first NATO meeting since the German decision to send, and allow the re-export, of its Leopard 2 main battle tanks to Ukraine. This joins up with the UK and US decisions to also send main battle tanks to Ukraine, which marks one of, if not the, most significant escalation in Western support for Kyiv so far.

JAPAN (MNI): BOJ Can Widen 10-Yr Target, Shorten Target - IMF

The Bank of Japan could increase long-term yields, widen the 10-year target band and/or raise the 10-year target, shorten the yield curve target as viable policy options, the International Monetary Fund said in its latest Article VI review, published Thursday. The Washington-based fund said that the BOJ could also shift “from a JGB yield target to a quantity target of JGB purchases," although the central bank would need to carefully assess the pros and cons of each strategy.”

JAPAN (NIKKEI): Japanese Investors Dump Foreign Bonds In Return To Domestic Market

Japanese investors dumped foreign bonds at a record pace in 2022, ending a years long buying spree as increased currency hedging costs eat into returns from overseas assets. The investors, including insurers and banks, sold a net 21.74 trillion yen ($168 billion) worth of foreign medium- and long-term bonds last year, the Finance Ministry reports. The figure is nearly eight times higher than the 2.8 trillion yen from 2013, the only other year that sales outpaced purchases since tracking of comparable data began in 2005.

GERMANY (MNI): Economy Minister Delivers Annual Economic Report

Comments hitting wires from German Economy Minister Robert Habeck regarding the country's economic outlook. He is delivering an address to the Bundestag on the annual economic report. States his belief that "the negative trend in inflation has been broken", and that "Inflation [will be] higher at the beginning of 2023, [with] further containment then in the course of the year. Then in 2024 inflation will be lower than in 2023, with higher growth."

DATA

ITALY DATA (MNI): Consumer Confidence Dips Despite Outlook Uptick

• ITALY JAN SA BUSINESS SENTIMENT INDICATOR 109.1; DEC 107.9r
• ITALY ISTAT JAN CONSUMER CONFIDENCE INDEX 100.9 (FCST 102.5); DEC 102.5

Italian business sentiment ticked up for a third consecutive month in January, rising 1.2 points to 109.1, adding to a slew of improved eurozone sentiment data largely boosted by optimistic outlooks as recessionary fears wane.

SWEDEN DATA (MNI): Weakened Swedish Economic Indicator Clouds EU Sentiment Outlooks

• SWEDEN JAN ECONOMIC TENDENCY SURVEY 82.3; DEC 85.0

The Swedish Economic Tendency Survey weakened by 2.7 points to 82.3 in January as manufacturing and services edged lower. The indicator remains firmly below the long-run average of 100. The slump was driven by a 4.2-point decline in manufacturing sentiment, which had now declined for eight consecutive months on the back of weak order demand. Consumer confidence ticked up only marginally.

JAPAN DATA (MNI): BOJ On Watch as Japan Services PPI Slows

• JAPAN DEC SERVICES PRODUCER PRICE INDEX +1.5% Y/Y; NOV
• JAPAN DEC SERVICES PRODUCER PRICE INDEX +0.1% M/M; NOV +0.2%

Japan's services producer price index rose 1.5% y/y in December, marking the 22nd straight rise but slowing from November's 1.7% increase, preliminary data released by the Bank of Japan on Thursday showed, suggesting services inflation is more muted than in many countries.

FOREX: Price Action Shallow, With USD a Touch Firmer Pre-GDP

• The greenback is on the front foot early Thursday, rising against most others in G10. Market moves are shallow so far, keeping prices well within recent ranges. A more constructive equity market backdrop has shored up USD/JPY, which is posting a near 100 pip recovery off the overnight lows. The Y130.00 handle marks the next hurdle for the pair, and a break above opens progress toward the 130.78 20-day EMA.
• NOK sits on top of the G10 pile, benefiting from firmer energy prices (WTI and Brent trade higher by 0.5% apiece). USD/NOK holds below 9.90 and the bearish developments across moving averages are continuing to add weight. Earlier this week, the 50-dma slipped below the 200-dma to form a death cross for the first time since the onset of the COVID pandemic in 2020.
• Advanced Q4 GDP from the US takes focus going forward, with the annualized quarterly figure seen clocking in at 2.6% - below the prior quarter's 3.2% clip. Weekly US jobless claims data and December new home sales make up the rest of the calendar. With the Fed remaining inside the pre-meeting media blackout period, the speaker slate is light Thursday.

BONDS: Bear Steepening in Core FI

• Core fixed income has moved lower this morning with USTs, German and gilt curves bear steepening. There was no real obvious trigger to the moves, but it was a broad cross-asset move with equities moving higher concurrently.
• There has been downward pressure at the margin after a report from the IMF which suggested a number of options for the BoJ including raising the 10-year target or shortening the yield curve target as options.
• Looking ahead to later today we will receive the first print of US Q4 GDP alongside December durable goods and weekly jobless claims data. We will also receive US new home sales data. The bar is high to change the outlook for next week's FOMC meeting where markets currently price 26bp.
• TY1 futures are down -0-4 today at 115-00+ with 10y UST yields up 3.1bp at 3.475% and 2y yields up 1.8bp at 4.146%.
• Bund futures are down -0.32 today at 138.04 with 10y Bund yields up 3.5bp at 2.186% and Schatz yields up 2.3bp at 2.541%.
• Gilt futures are down -0.28 today at 104.89 with 10y yields up 5.1bp at 3.291% and 2y yields up 4.4bp at 3.418%.

EQUITIES: Eurostoxx Futures Target 4206.0 Bull Trigger

EUROSTOXX 50 futures remain above support at 4097.00, the Jan 19 low. The trend outlook is bullish, however, the cycle remains overbought and this continues to warn of the potential for a short-term corrective pullback. A move lower would allow the overbought reading to unwind and open 4075.60, the 20-day EMA and a key near-term support. Key resistance and the bull trigger is at 4206.00, the Jan 18 high. A breach would resume the uptrend. S&P E-Minis have recovered from yesterday’s low. Attention is on key S/T resistance at 4056.75, Jan 23 high. A break of this level would confirm a resumption of recent bullish activity and signal scope for a climb towards 4100.00 and key resistance at 4180.00 further out, the Dec 13 high. The key short-term support to watch lies at 3901.75, the Jan 19 low. A break would be bearish. 4056.75 and 3901.75 represent important directional triggers.

• Japan's NIKKEI closed lower by 32.26 pts or -0.12% at 27362.75 and the TOPIX ended 2.29 pts lower or -0.12% at 1978.4.
• Across Europe, Germany's DAX trades higher by 40.35 pts or +0.27% at 15117.31, FTSE 100 higher by 17.54 pts or +0.23% at 7761.49, CAC 40 up 52.29 pts or +0.74% at 7093.63 and Euro Stoxx 50 up 28.12 pts or +0.68% at 4174.4.
• Dow Jones mini up 34 pts or +0.1% at 33863, S&P 500 mini up 12.25 pts or +0.3% at 4045.25, NASDAQ mini up 78.75 pts or +0.66% at 11957.25.

COMMODITIES: Gold Continues Price Sequence of Higher Highs and Higher Lows Continues

WTI futures traded higher Monday but the contract has pulled back from its recent highs. Key short-term resistance is located at $82.66, the Jan 18 high. Clearance of this hurdle would reinstate the recent bullish theme and expose $83.14, the Dec 1 high and $85.33, a Fibonacci retracement. On the downside, the support to watch lies at $78.45, the Jan 19 low. A break of this level would signal a potential reversal. Trend conditions in Gold remain bullish and the yellow metal is higher again today. This confirms an extension of the uptrend and maintains the price sequence of higher highs and higher lows. Moving average studies remain in a bull mode position - reflecting the uptrend. The focus is on $1963.0 next, a Fibonacci retracement. Support to watch lies at $1890.0, the 20-day EMA. Short-term pullbacks are considered corrective.

• WTI Crude up $0.29 or +0.36% at $80.48
• Natural Gas down $0.22 or -7.01% at $2.852
• Gold spot down $9.79 or -0.5% at $1936.23
• Copper up $0.85 or +0.2% at $425.3
• Silver down $0.27 or -1.14% at $23.6405
• Platinum down $9.2 or -0.88% at $1032.53